The Hartford Sees 37% Gain in Q4 Net Income to $620M

January 28, 2005

The Hartford Financial Services Group Inc. reported a 37-percent increase in fourth quarter 2004 net income to $620 million, or $2.08 per diluted share, hitting an all-time quarterly record.

Net income in the current period included net realized capital gains of $23 million (after-tax). In the fourth quarter of 2003, net income was $454 million, or $1.59 per diluted share, which included net realized capital gains of $29 million (after-tax).

The Hartford’s operating income in the fourth quarter of 2004 was up 38 percent to $596 million, or $2.00 per diluted share, compared to $433 million, or $1.52 per diluted share, in the fourth quarter of 2003.

“Wrapping up a tremendous year, each of The Hartford’s operating companies was charging ahead during the fourth quarter, with property/casualty and life showing operating income gains of 47 percent and 23 percent, respectively,” said Ramani Ayer, chairman and CEO of The Hartford.

“For 2004, The Hartford’s net and operating income both hit records, and revenues were up 21 percent over 2003,” said Ayer. “Our return on equity for 2004 exceeded 16 percent, and our book value per share, excluding AOCI, rose 19 percent to $43.55 as of December 31, 2004.”

For the full year of 2004, The Hartford reported record net income of $2.1 billion, compared to a net loss of $91 million for the full year 2003. The first quarter of 2003 included an increase in asbestos reserves of $1.7 billion (after-tax). Net realized capital gains for 2004 totaled $178 million (after-tax) versus for $191 million (after-tax) for 2003.

Operating income for the full year 2004 was $2 billion versus a 2003 operating loss of $253 million, which included the asbestos reserve charge. Net income and operating income for the full-year 2004 included tax benefits totaling $216 million stemming from the favorable resolution of various tax items relating to prior tax years.

On regulatory matters, The Hartford reportedly continues to cooperate fully with various federal and state authorities in their investigations that involve the company.

“We respect the work regulators are doing and, given the value we place on our integrity and reputation, we have a total commitment to cooperate on these matters,” Ayer said. “As we have said, any breach of our corporate ethics standards, or improper or illegal activity that is found, will result in swift corrective and disciplinary action.

“As we address these regulatory matters, we are also focused on running our business and delivering exceptional performance,” added Ayer.


“Property/casualty reported its most profitable quarter ever with operating income of $331 million, despite a moderating P&C cycle,” said Ayer, adding that written premium growth of 11 percent in ongoing operations was driven by gains in both business insurance and personal lines. “We continued to see the benefits of our two-pronged growth strategy to focus on our most profitable agents and to add new agents and sales reps to our roster.”

The company recorded a combined ratio in ongoing operations of 90.2 percent in the fourth quarter of 2004, a 4.4-point improvement over the same period of 2003. Catastrophes were 1.2 points in the current quarter compared to 1.5 points in the fourth quarter of 2003, and did not have a significant effect in either the 2004 or 2003 period.

“For the year, ongoing property/casualty written premium also reached a record at $9.9 billion, a 12-percent increase from 2003,” said Ayer. “Our total property/casualty operations generated returns within our targeted levels of 13 percent to 15 percent. Although pricing increases continued to slow in 2004, pricing has generally remained above loss costs largely as a result of favorable frequency trends.”

Business insurance

Business insurance reported strong written premium growth of 15 percent to $1.16 billion in the fourth quarter of 2004, as well as positive underwriting results. The combined ratio for the business insurance segment was 94.4 percent compared with 93.1 percent in the fourth quarter of 2003. Catastrophes totaled 1.0 point during the current quarter versus 0.7 points in the same period of 2003.

The Hartford had another excellent quarter in small commercial with written premium up 21 percent to $569 million, fueled by strong retention, new business and building momentum in Spectrum Xpand. Also contributing to the successful quarter was the addition of sales staff who successfully engaged more agents, particularly in the Xpand line where nearly 1,000 agents produced business during the quarter.

In middle market, written premium grew 9 percent in the current quarter as the company benefited from solid premium retention rates in excess of 80 percent and the focused marketing of products for industry sectors. The Hartford’s expanded underwriting and sales presence in local markets helped agents more closely match customer needs with the company’s underwriting appetite and product portfolio.

Personal lines

Premium written through independent agents grew at a brisk pace in the current quarter over the same period of 2003, rising 18 percent. The company’s Dimensions auto and home lines propelled the solid growth as the field sales force helped drive increased adoption of the products by independent agents. Overall, personal lines written premium rose to $856 million, 7 percent higher than a year ago. Growth in the quarter was moderated somewhat by more modest price increases.

The personal lines combined ratio improved 7.5 points to 89.3 percent in the current quarter from 96.8 percent in the fourth quarter of 2003, mostly due to continuing favorable claim frequency and favorable catastrophes.

Catastrophes during the current quarter totaled (0.3) points, primarily reflecting a reduction in net catastrophe loss reserves related to the third quarter 2004 hurricanes, compared to 2.7 points in the 2003 fourth quarter.

Specialty commercial

The Hartford recorded written premium growth of 7 percent in its specialty commercial lines during the quarter. The company’s underwriting remained selective in a competitive market, and new business growth declined in lines such as property and professional liability.

Specialty commercial reported a combined ratio of 81.8 percent in the current quarter compared with 93.5 percent a year ago. The strong improvement in combined ratio in the current quarter resulted from lower loss estimates for the current accident year in the bond and property lines.

Catastrophes totaled 4.2 points in the current quarter, reflecting additional development related to the third quarter 2004 hurricanes, versus 1.0 point in the fourth quarter of 2003.

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